The Beige Bombshell
Manufacturing matters. New economy or old economy, the
engine of growth remains manufacturing. Manufacturing may account for a
diminishing proportion of total gross domestic product, but without the
lifeblood of cars, chips and potato chips, service-sector accounting, sales and
administration jobs — and their own contribution to the economy —
falter.
The Federal Reserve released its Beige Book, a survey
from the Fed’s 12 District banks on economic conditions. The survey reinforced
what government reports have been indicating, that factory production has
been in a tailspin since last fall. And tellingly, the Fed as much as commented
on the linkage between manufacturing, mentioning that, “sustained weakness
in the manufacturing sector spilled over to other businesses.” The survey
raises the odds of an interest rate cut at the Fed’s August 21 meeting.
Debt futures also rallied because of unusually strong
demand for 10-year Treasury notes. The US Treasury sold $11 billion of 10-year
notes and received the highest number of bids to buy such instruments since
1993. The so-called bid/cover ratio measures demand by comparing the number of
bids to the amount of securities being sold and came in at 2.85. The Treasury
will offer an additional branch of debt tomorrow, offering $5 billion of 30-year
T-bonds.
September T-bonds
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in an inside-day pattern prior to the release of survey, a situation pointed out
in the Mid-Day Futures Market Alert. Bonds also signaled they were ready to
detonate due to their standing on the 6/100 Low Volatility
List. While this volatility indicator does not indicate direction, T-bonds’ Pullback From
High signal did suggest a move to resistance defined by the Levels From The
Bond Pit on the Futures Indicators Page. Various long triggers could have been
used here, including a move out of a Haggerty Slim Jim-like formation on the
intraday five-minute chart, a trade above yesterday’s last-hour’s high, or the
expansion above the 103 18/32 Level From The Bond Pit.
USU1 added 1 2/32 to 103 31/32, while TYU1 gained 25/32
to 106 3/32. Electronic bonds continued higher after pit trading, reaching a
high of 104 4/32 prior to press.
Stock index futures plunged on the bad read of the
economy from the 12 District Fed banks.
Nasdaq 100 futures
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S&P futures
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Dow futures
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Japanese yen
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higher, looking like they could tag their one-month high near .82. But a
confluence of highs in the .8160 area worked to cap the early rally and send the
yen back to opening levels where it closed up .0005 at .8136.
Traders shrugged off bearish news about the German
economy yesterday as euro FX futures
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both came back from down starts to make good on their Momentum-5
List. Buy triggers included yesterday’s low, a push through the intraday
high around 11:10 AM ET, an Off The Blocks
entry (above the prior day’s last-hour high) as well as multiple intraday
pullback from high setups. ECU1 closed .00350 higher at .87980 and Swiss francs
gained .0027 to .5852.